As part of its efforts to acquire premium assets, Health Care REIT Inc. (HCN) has partnered with Revera Inc. to own 47 high-quality seniors housing and care communities with around 5,000 units that are positioned in key metropolitan markets in Canada.
Following the deal closure, Health Care REIT now has a 75% interest in the $1.35 billion portfolio while the rest of the interest is owned by Revera. The communities will now be managed by Revera under an incentive-based management contract. Health Care REIT’s share of the purchase price is $1.01 billion.
The deal is a strategic fit as it is projected to result in a first-year unlevered net operating income (NOI) yield of 7.0%. Moreover, it is expected to grow in excess of 5.0% over the near-term and 4.0% – 5.0% over the longer-term.
Moreover, we believe that for Health Care REIT, better-than-expected first-quarter 2013 results – including an earnings surprise of 1.11% and consistent overall portfolio performance – as well as successful completion of the Sunrise Senior Living facility acquisition are the key growth drivers.
However, a large portion of its revenues originates from a few tenants, which exposes it to concentration risks, and partly undermines its growth potential.
Health Care REIT currently holds a Zacks Rank #3 (Hold). However, other REIT stocks that are performing better and deserve a look are CubeSmart (CUBE), DCT Industrial Trust Inc. (DCT) and Host Hotels & Resorts Inc. (HST), all carrying a Zacks Rank #2 (Buy).
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